Ahead of the Open (VIP) -- February 11, 2014

February 11, 2014 02:17 AM
 

Corn futures are called 1 to 2 cents lower on spillover from soybean futures.

  • Corn futures were choppy overnight but ended the overnight session around 1 cent lower.
  • The February Supply & Demand (S&D) Report typically is not a trend-setting report, which was the case again yesterday. Futures firmed initially on the steeper-than-expected cut to U.S. 2013-14 carryover, but then softened.
  • Brazil's crop-estimating agency, Conab, has trimmed its corn crop estimate from 78.97 MMT to 75.47 MMT. This news is currently being ignored by the market.
  • Gulf corn basis is a penny softer for nearby delivery, which raises concerns about export demand. Basis is still a strong 76 cents over March futures, however.

 

Soybean futures are called 5 to 10 cents lower on forecast rains for southern Brazil.

  • Soybean futures ended the overnight session 5 to 9 cents lower, with nearbys leading losses.
  • Improved rainfall chances for southern Brazil are pressuring futures this morning as this would help relieve stressed beans during the pod-filling stage.
  • Meanwhile, Conab has trimmed its Brazilian soybean crop peg from 90.31 MMT to 90.01 MMT. Traders are discounting this estimate this morning due to expected rains.
  • There is still disappointment after USDA left 2013-14 U.S. soybean carryover unchanged yesterday given strong usage.
  • Also this morning, USDA announced a 116,000-MT soybean sale to China for 2014-15.
  • Gulf soybean basis is steady to 1 cent higher this morning, with immediate delivery standing 86 cents over March futures.

 

Wheat futures are called 1 to 2 cents higher on crop concerns.

  • SRW and HRW futures ended the overnight session mostly 1 cent higher, with HRS 1 to 3 cents higher.
  • Winter wheat markets are being supported by frigid temps across the Plains and Midwest, which raise concerns about winterkill.
  • Yesterday's steeper-than-expected cut to 2013-14 U.S. wheat carryover by USDA is also on traders' minds.
  • Meanwhile, the Australian Bureau of Agriculture Resource Economics and Sciences (ABARES) raised its 2013-14 Australian wheat crop peg from 26.213 MMT to 27.013 MMT due to strong crop prospects in Western Australia. This is above USDA's current peg of 26.5 MMT.
  • Gulf HRW basis is 1 to 2 cents weaker for nearby delivery, while SRW basis is steady this morning.

 

Live cattle futures are called mixed amid position squaring.

  • Live cattle futures are expected to follow yesterday's mixed trade with more back-and-forth price action as traders reevaluate positions.
  • Given the tight supply outlook, periods of selling should be limited and futures last week posted a near-term low.
  • Meanwhile, expectations are building for $1 to $2 lower cash cattle trade this week after feedlots carried animals over into this week to raise available supplies.
  • Choice beef values firmed 39 cents yesterday, which signals the product market is at least nearing a low. Packers moved just 121 loads of beef yesterday.
  • A weaker tone in the corn market this morning is supportive for feeder futures.

 

Lean hog futures are called steady to firmer on strength in the cash market.

  • Lean hog futures are expected to follow yesterday's mixed performance with a steady to firmer start due to strength in the cash market.
  • Cash bids are called steady to $1 higher this morning as packers are still seeking supplies for this week's kill.
  • But gains in the cash market and futures could be tempered as February futures hold nearly a $2 premium to the cash index and the contract expires this week.
  • April hogs will soon have the responsibility of following the cash market more closely and ended yesterday at around a $10 premium to the cash index.
  • Traders are also keeping an eye on the pork market, as movement was slow to start the week, but values were 37 cents higher.
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